What pioneering monetary policy framework did the Reserve Bank of New Zealand Act 1989 introduce internationally?
Answer and explanation
Correct answer: D. Granting the central bank operational independence to achieve explicit inflation targets (inflation targeting)
- Step 1: New Zealand was the first country in the world to adopt formal inflation targeting. Step 2. The Reserve Bank Governor was given operational independence to maintain price stability, governed by a Policy Targets Agreement. Answer: Granting the central bank operational independence to achieve explicit inflation targets (inflation targeting). Why not the others: This framework was widely copied by central banks worldwide, including the Bank of England and Federal Reserve.
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